Under the Illinois exemption system, homeowners can exempt up to $15,000 of equity in a home or other property covered by the homestead exemption.
For example, let’s say your house is worth $100,000. You have a $90,000 mortgage on the property, leaving $10,000 of home equity. Your equity will be fully exempt using the Illinois homestead exemption if you file for bankruptcy. Your creditors won’t be able to touch your equity, and you will keep your home (as long as you can continue making mortgage payments and paying taxes).
The homestead exemption applies to real and personal property you use as a residence, including your home, condominium, mobile home, or co-op. The homestead exemption also applies to sale proceeds from the sale of any real or personal property for up to one year from the date you sell the property.
In Illinois, the homestead exemption is automatic. You don’t have to file a homestead declaration to claim the homestead exemption in bankruptcy. However, to protect your home, you must also know how real estate is treated in Chapters 7 and 13. Consider reading Your Home in Chapter 7 and Your Home in Chapter 13.
In Illinois, married couples filing a joint bankruptcy can double the homestead exemption amount and protect up to $30,000 of home equity. Both spouses must have an ownership interest in the property to double the amount.
You can learn about the advantages and disadvantages of joint bankruptcy filings in Filing Considerations for Married Couples.
A tenancy by the entirety is often called a "super exemption," although it’s not an exemption. If you and your spouse hold your home as a tenancy in the entirety and only one spouse files for bankruptcy, you could have greater protection against creditors because, in that situation, creditors are usually unable to take it to pay debts.
However, there are limits to the protection. For instance, a tenancy by the entirety won’t protect the residence against some tax debts. Because this is one of the trickier protections, you'll want to consult a lawyer about your situation.
Illinois’s homestead exemption is in the Illinois state statutes at 735 Ill. Comp. Stat. 5/12-901 and 5/12-902 on the Illinois General Assembly website. (You can learn how to find state statutes in Laws and Legal Research.)
The statute portion of the Illinois General Assembly website might not post the most current exemption amounts. If a session of the General Assembly has ended and the amounts were updated, the current amounts will be posted in the General Assembly Public Acts area.
Did you know Nolo has made the law easy for over 50 years? It’s true, and we want to ensure you find what you need. Below you’ll find more articles explaining how bankruptcy works. And don’t forget that our bankruptcy homepage is the best place to start if you have other questions.
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Updated September 20, 2023
]]>Facing financial challenges is a part of life. But if you’re one of the millions struggling financially due to a job loss, illness, or another event in Illinois, bankruptcy can help. Here, you’ll find an explanation of Chapters 7 and 13, checklists to help you understand the process and stay organized, and Illinois’s property exemption laws and filing information.
Because we couldn’t include everything in one article, you'll want to check out its companion, What You Need to Know to File for Bankruptcy. You’ll find lots more details there.
In most respects, filing for bankruptcy in Illinois isn’t different from filing in another state. The bankruptcy process falls under federal law, not Illinois state law, and works by unwinding the contracts between you and your creditors. That’s what gives you a fresh start.
But Illinois’s laws come into play in a significant way because they determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after reviewing some basics.
Most people file either Chapter 7 or Chapter 13, and you're not alone if you don’t know how the two differ. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.
Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quick, taking only a few months to complete. And it’s cheap. You don't pay anything to creditors.
Chapter 7 bankruptcy works well for people who own mainly the essential items needed to live and work and not much else. People with more assets could lose them in Chapter 7 because the Chapter 7 trustee, the official responsible for the case, sells unnecessary luxury items and distributes the proceeds to creditors. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas, even your house or vehicle if you have more equity than you’re allowed to keep.
Also, unlike Chapter 13, Chapter 7 has no payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you’re behind on the loan when you file.
Chapter 13 involves repaying creditors some or all of what's owed using a three- to five-year repayment plan. Chapter 13 filers keep everything they own, and the payment plan provides ways to improve sticky financial situations.
For instance, you can catch up on late payments and save your home from foreclosure or your car from repossession. Also, if you need time to repay a debt you can’t eliminate or "discharge" in bankruptcy, you can use Chapter 13 to force a creditor into a payment plan and repay your balance over time. Learn more about when filing for Chapter 13 is better than Chapter 7.
The biggest downside to this chapter? It can be expensive. Many people can’t afford the monthly payment. Also, businesses can't file a Chapter 13 case. If you're a business owner, it's a good idea to learn about the ins and outs of small business bankruptcies before choosing the bankruptcy right for you.
Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a “secured debt.” If you don’t pay what you owe, the lender recovers the property.)
But you can't discharge all debts. You’ll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worthwhile.
For instance, nondischargeable debts, like domestic support arrearages and recent tax debt, won’t go away in bankruptcy. Also, student loans aren’t easy to wipe out because you'd have to win a separate lawsuit (however, in 2023, steps have been taken to ease the student loan discharge process with a new student loan bankruptcy form).
Learn more about student loans in bankruptcy.
You won't be surprised to learn that qualifying for bankruptcy involves meeting several requirements. Because you're only entitled to a discharge every few years, if you've filed before, you'll want to check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.
You’ll also need to meet specific chapter requirements. Here are the qualification basics for Chapters 7 and 13.
You'll qualify for Chapter 7 bankruptcy if your family’s gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").
Want an easy way to do this online? Use the Quick Median Income Test. If you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you’ll qualify for Chapter 7.
Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:
Find out more about calculating a Chapter 13 bankruptcy payment.
You won't lose everything in bankruptcy. You’ll use bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you'll keep in your case.
Filers can protect some home and vehicle equity, personal possessions, retirement accounts, and more. Below is a list of the exemptions filers use regularly when filing for bankruptcy.
The homestead exemption helps you keep a home by protecting up to $15,000 in your residential home. You can use the exemption to protect your farm, mobile home, a lot with buildings, condominium, or cooperative, too. If you sell your home, you can exempt the proceeds for up to one year. (735 ILCS §§ 5/12-901, 902, 906.)
For more details about how the homestead exemption works in Illinois, including whether you can protect more equity if you hold your residence as tenants by the entirety, see The Illinois Homestead Exemption.
You’ll need transportation for work and errands. This exemption allows you to exempt up to $2,400 of equity in one motor vehicle. (735 ILCS § 5/12-1001(c).) Find out how the motor vehicle exemption works in a Chapter 7 case.
The wildcard exemption lets you choose personal property (not real estate) up to a value of $4,000. Not only can this exemption be applied to luxury property, but it’s possible to add it to other exemptions, too. For instance, using it with the motor vehicle exemption could help you retain a more valuable car. (735 ILCS § 5/12-1001(b).) Learn about using a wildcard exemption in bankruptcy.
For a more extensive list, see Illinois Bankruptcy Exemptions. Check for changes on the Illinois General Assembly website.
You can file for bankruptcy in Illinois after living there for over 180 days. However, you must live in Illinois for at least 730 days before filing. Otherwise, you’d use the previous state’s exemptions.
If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for most of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
Learn more about filing for bankruptcy after moving to a new state.
Exempt your property carefully. The bankruptcy trustee, the court-appointed official assigned to manage your case, will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.
Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn’t cover it entirely. Believing that the car qualifies as art, at least in his mind, Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.
Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:
You can expect creditors to call until you file. It’s usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they’ll have to stop calling you.
You’ll complete the steps listed below in “What Steps Are Involved in an Illinois Bankruptcy?” But not everyone should file their own bankruptcy case.
The best candidate is a Chapter 7 debtor who meets qualification requirements, can eliminate all debts, and can protect all property with bankruptcy exemptions. People filing for Chapter 13 or Chapter 7 filers with complicated cases should seek representation.
Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about bankruptcy. You’ll find it here: Do I Need a Lawyer to File for Bankruptcy?
All filers pay a $338 filing fee in Chapter 7 unless the court grants a fee waiver and a $313 filing fee in Chapter 13 (amounts current as of August 2023). You’ll also pay approximately $50 to $75 for credit counseling and debt management courses.
If you hire a bankruptcy lawyer to represent you, you can expect to pay from $1,500 to $2,500 upfront for most Chapter 7 cases, although the price will depend on the going rates in your area and case complexity. Chapter 13 legal fees run about $1,000 to $1,500 more, but you can pay them in installments through the Chapter 13 payment plan.
Learn about your options if you can't afford to hire a bankruptcy attorney.
We all know that seeing the forest helps us recognize the trees. Similarly, understanding the significant steps you’ll take during your bankruptcy journey. will help you understand the bankruptcy process. Think of this checklist as a roadmap, but you can also use it to track your progress.
Once you decide to file, the fun begins! Well, not really. You'll start by gathering your financial information, which can take time. But our bankruptcy document checklist should help you organize what you or your attorney will need.
Each of the three districts in Illinois has multiple divisions. File your case in the court covering the area you’ve lived the most during the 180 days before filing. You'll find filing information and local forms on the court websites (click the links).
Here’s where the courts were last we checked (you can verify this using the Federal Court Finder tool):
U.S. Bankruptcy Court U.S. Bankruptcy Court |
U.S. Bankruptcy Court U.S. Bankruptcy Court U.S. Bankruptcy Court |
U.S. Bankruptcy Court U.S. Bankruptcy Court |
Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here’s what will happen next:
These things must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.
Did you know Nolo has made the law easy for over fifty years? It’s true, and we want to ensure you find what you need. Below you’ll find more articles explaining how bankruptcy works. And don’t forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated August 25, 2023
Illinois bankruptcy exemptions protect your property in bankruptcy, and becoming familiar with bankruptcy exemptions before filing will help you determine whether your assets will be at risk.
If you have more questions, read How to File Bankruptcy in Illinois. You’ll find answers, helpful checklists, and an interactive bankruptcy quiz link.
Bankruptcy helps struggling people get back on their feet by lessening their debt burden, not stripping them of everything they own. Exemptions allow bankruptcy filers to keep things needed to maintain a home and employment.
But paying creditors is also an important consideration. Bankruptcy exemptions balance these interests by letting filers keep necessary property but not unnecessary luxury items. Creditors receive bankruptcy funds when a bankruptcy filer owns “nonexempt” property not covered by a bankruptcy exemption.
You’ll compare your property to Illinois’s exemption laws. In most states (not all), debtors can use exemption laws to keep property from a creditor's reach in and outside bankruptcy.
Example. Big Creditor sued Ronin and received a $5,000 money judgment. When Big Creditor attempted to “levy” or remove money from Ronin’s bank account, Ronin objected in court. Because the state’s exemption law allowed Ronin to protect $1,500 of funds in a bank account, Big Creditor could seize only $3,500.
Example. When Maria filed for bankruptcy, she also had $5,000 in her checking account. She listed the state’s $1,500 cash exemption in her bankruptcy petition and gave the nonexempt $3,500 to the bankruptcy trustee.
Yes, but you must use the Illinois bankruptcy exemptions because the federal bankruptcy exemptions aren’t available in this state. However, Illinois filers can use the federal nonbankruptcy exemptions. You’ll find both lists below.
In many cases, married filers can double the exemption amount when filing together when they both own the property. Check with a local bankruptcy lawyer for specifics.
Illinois bankruptcy filers can protect home equity using the Illinois homestead exemption, equity in a car using the Illinois motor vehicle exemption, and more.
Generally, the homestead exemption protects equity in the home you live in. In Illinois, you can exempt up to $15,000 of equity in your residence, which can include a farm, mobile home, lot with buildings, condominium, or cooperative. This exemption also protects proceeds from the sale of a homestead for one year. (735 ILCS 5/12-901, 902, 906.)
You might also be able to protect more equity if you hold your residence as tenants by the entirety and only one spouse files for bankruptcy. (735 ILCS 5/12-112.)
Learn more about the Illinois homestead exemption in bankruptcy and other requirements you must meet when protecting your home in bankruptcy.
You won't have to be without transportation if you file for bankruptcy, but your car will need to be modest. In Illinois, you can protect up to $2,400 in one motor vehicle. (735 ILCS 5/12-1001(c).) (44-13-100(a)(3).)
Example. Jolene owns a 2008 Toyota Camry worth $12,000. She owes the dealer $10,000, leaving $2,000 of equity. She can file for bankruptcy in Illinois and use the $3,000 motor vehicle exemption to protect her vehicle fully.
Learn more about protecting cars in bankruptcy and how the motor vehicle exemption works in a Chapter 7 case.
A wildcard exemption protects any property of your choosing. In Illinois, you can protect $4,000 of any property other than real estate. (735 ILCS 5/12-1001(b).)
Most tax-exempt pensions and retirement accounts are exempt because federal law lets filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 USC 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)
You can check with your fund to find out if it qualifies for tax-exempt status. Additionally, Illinois provides that the following pensions and retirement accounts are exempt under Illinois law:
Illinois’s exemption amounts adjust periodically and these figures are not being updated. You'll find Illinois's statutes online on the Illinois General Assembly website. The best way to verify exemptions is by consulting a local bankruptcy lawyer.
One of two things will happen. You'll either lose nonexempt property or pay to keep it, depending on whether you file for Chapter 7 or Chapter 13. Here's how it works.
In Chapter 7, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors. In Chapter 13, filers pay the value of the nonexempt property to unsecured creditors. Learn about secured and unsecured debt in bankruptcy.
The procedural differences are necessary because filers can keep all property in Chapter 13 but not in Chapter 7. Without different systems, creditors would receive less in Chapter 13 than in a Chapter 7 case.
Example. Suppose you couldn't exempt a motorcycle in Chapter 7, and the Chapter 7 trustee sold it and paid unsecured creditors $10,000 after deducting sales costs. If you filed for Chapter 13, you'd pay unsecured creditors at least $10,000 through the Chapter 13 repayment plan to keep the motorcycle.
Chapter 7 works for people who can’t afford to repay creditors. Chapter 13 filers typically earn too much to qualify for Chapter 7 and must pay into a five-year repayment plan. Before filing for bankruptcy, you’ll take a “means test” to determine whether you qualify for Chapter 7 or 13.
Occasionally, people qualifying for Chapter 7 file for Chapter 13 to prevent a home foreclosure, car repossession, or wage garnishment. The Chapter 13 plan allows the filer to catch up on back payments over time, a benefit not available in Chapter 7.
Most Chapter 7 cases close after four months, although the Chapter 7 bankruptcy trustee sometimes needs additional time to sell property or resolve a dispute. Chapter 13 cases take three to five years to complete.
You can file for bankruptcy in Illinois after living there for over 180 days. However, you must live in Illinois for at least 730 days before using Illinois exemptions. Otherwise, you'd use the previous state's exemptions.
Suppose you hadn’t lived in one state the entire two years before filing. In that case, you'd use the exemptions of the state you lived in the longest during the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
More rules exist, including requirements for multiple bankruptcy filings. Find out more about filing for bankruptcy after moving to a new state and who can and can't file for bankruptcy.
If you don't exempt your property carefully, you could lose it. Answers to these questions might help you steer clear of typical issues.
Do I automatically get to keep my exempt property? Generally, no. Here's the procedure you'll need to follow: Select the exemption set that best protects your property, list the exempt assets and applicable exemption laws on Schedule C: The Property You Claim as Exempt, and file it with your other required paperwork.
Will someone check my bankruptcy exemptions? The bankruptcy trustee, the court-appointed official tasked with managing your case, will review Schedule C to ensure you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.
Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption will only partially protect it. Believing that the car qualifies as art, Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.
Most trustees will likely try to work out the matter informally by discussing it at the 341 meeting of creditors or by phone or email. If you can’t resolve the problem, the trustee will file a motion with the bankruptcy court.
It's worth noting that it's not a good idea to finesse exemptions. Not only are you obligated to supply correct information on your bankruptcy forms, but purposefully making inaccurate statements could be fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Chapter 13 bankruptcy filers will almost always want to hire a bankruptcy lawyer. Chapter 13 is too complicated for most people to navigate successfully.
Chapter 7 filers also benefit from hiring a bankruptcy lawyer. Still, it’s more feasible to represent yourself if you have a relatively simple Chapter 7 case. But you should know that Chapter 7 filers can’t dismiss a Chapter 7 matter without court approval, so it’s prudent to consult a bankruptcy lawyer about potential issues. The extra step could help prevent unexpected property loss.
You can expect to pay $1,500 to $2,500 for the average Chapter 7 case and more for a Chapter 13 matter. Bankruptcy lawyers with more experience will charge higher fees than those practicing in large cities because of the costs associated with doing business.
Even so, most bankruptcy matters won’t require a top-tier lawyer. But because of the specialized nature of bankruptcy rules, you will want someone who has filed many cases.
At the time of writing, filing fees are $338 for Chapter 7 and $313 for Chapter 13, and costs for mandatory credit counseling and debt management courses run $50 to $75.
No, not in a Chapter 7 case. Chapter 7 lawyers won’t file your matter before you’ve paid in full because the bankruptcy court would erase any outstanding balance with other dischargeable debts. You can pay Chapter 13 attorneys’ fees in installments through the Chapter 13 plan.
Did you know Nolo has made the law easy for over fifty years? It’s true, and we want to ensure you find what you need. Below, you’ll find more articles explaining bankruptcy and how it works. And don’t forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated August 29, 2023